‘Tax Day’ Announcements for Family Businesses
23rd March 2021
The Government has today published more than 30 tax policy updates and consultations, as part of the first ‘Tax Day’.
Of interest to family business owners there are updates on Inheritance Tax, Trusts, Business Rates and the future tax treatment of Defined Benefit Superfunds. Despite media speculation about possible changes to Capital Gains Tax, there were no announcements on that, and we still await the second part of the Office of Tax Simplification review of the tax (read our responses to the OTS review here.
There were also announcements on the administration of the tax system, tackling tax avoidance, aviation and carbon taxes, and Social Investment Tax Relief. You can find the full Command Paper which summarises the announcements here, and links to all the consultations and papers here.
HM Treasury today published the Financial Secretary’s response to the first part of the Office of Tax Simplification review of Inheritance Tax. The first part of the review focused on the administration of IHT, and made recommendations to reduce the number of people completing IHT forms, as well as digitising parts of the service. The Government has yet to respond to the second part of the review which considered, amongst other things, the use and scope of reliefs. The IFB responded in full to the OTS review of IHT, and our response to parts one and two are available here.
In addition to the response to the OTS review the Government say they "will reduce administrative burdens for those dealing with inheritance tax. Reporting regulations will be simplified later this year so that from 1 January 2022 over 90% of non-taxpaying estates each year will no longer have to complete inheritance tax forms for deaths when probate or confirmation is required. In addition, the current temporary provision for those dealing with a trust or estate to provide an inheritance tax return without requiring physical signatures from all those involved will be made permanent. Reporting regulations will also be updated to clarify the requirement for estates to submit an inheritance tax account where the deceased was never domiciled in the UK but owned indirect interests in UK residential property."
In 2019 HM Treasury consulted on the taxation of trusts. The IFB response to that consultation is available here. In our response we stated that reform of the trusts regime was unnecessary, and that contrary to popular opinion trusts already face significant tax charges and imposing further burdens on them would act as a barrier to successful succession planning for some family businesses.
The Government has today published the outcome of that consultation, alongside a summary of response (here). The Government states that the responses “did not indicate a desire for comprehensive reform of trusts at this stage”. They say they will “keep the issues raised under review to ensure that its long-term approach to the taxation of trusts meets its objectives. In the shorter term, the government will continue to review specific areas of trust taxation on a case-by-case basis, with responses relating to those areas forming part of the consideration."
We are pleased to see the Government has listened to us and others on this matter. We will continue to engage actively on all matters related to trusts.
Defined Benefit Pension Superfunds
Many businesses with historic Defined Benefit Pension schemes are now looking to consolidators or Superfunds as a way to secure the long term future of the scheme and the business. This is a new and evolving area of the pensions landscape.
As such, the Government announced to that they will be reviewing the appropriate taxation framework for Superfunds. This work will proceed alongside the work under way on the development of the permanent regulatory regime – at present a temporary regime is in place.
The Government said “This is an innovative area and it should not be assumed that the tax regime that currently applies to entities and transactions in the Superfund structure or the pension schemes that have transferred to the Superfund will remain unchanged. The government’s approach will be informed by the features of the permanent regulatory regime." We will continue to monitor and engage with this work as it develops.
Ahead of the publication of the outcome of the full Fundamental Review of Business Rates in Autumn 2021, HM Treasury have published an interim report as part of their Business Rates review (here). This includes an update on changes announced at the Spending Review and Budget, and a summary of responses to the consultation.
If you would like to find out more about the IFB’s policy work, please get in touch.